Global ports are increasing in traffic and shipping containers are scarce. The carriers of raw materials and goods that supply the world are the beneficiaries of the current supply / demand imbalance.
Today, the actions of bulk carriers Bulk Eagle Shipping (NASDAQ: EGLE), Diana Expedition (NYSE: DSX), and Eneti (NYSE: NETI) reassembled as follows:
- Bulk eagle, 11.5%
- Diane, 9.2%
- Eneti (formerly Scorpio Bulkers), 14%
As vaccine deployments continue to accelerate and economies begin to reopen across the world, this backbone of global trade is starting to grab the attention of investors. The shares of these generally under-the-radar companies are getting noticed today after a single-day double-digit move. But the underlying commercial strength has caused some investors in the industry to buy all year round. Some may think of them as sleepy stocks, but Eagle Bulk, Diana and Eneti are up 108%, 65% and 38%, respectively, since the start of the year.
These dry bulk shipowners carry cargoes as diverse as coal, grain and iron ore, as well as fertilizers, steel and forest products. An example of the scale and speed of demand for these carriers can be seen in the Baltic Supramax Index (BSI). The index represents the value of chartering a vessel for a specified period of time or for transporting cargo for a fixed price from a port of loading to a port of discharge. In his recent report fourth quarter 2020 results conference callEagle Bulk said the year-to-date BSI average is $ 13,800, but the current spot price is now above $ 20,000. The highest level he had reached since 2016 was $ 15,000.
And it’s not just bulk shippers that are in demand. Container routes have been disrupted by closures and the need to mix up medical supplies related to the pandemic around the world. These are now in high demand at the busiest ports, and many are shipped empty to get to where the cargo is piling up. Lars Mikael Jensen, Global Ocean Network Manager for the world’s largest shipping company, AP Moller-Maersk (OTC: AMKBY), Recount The New York Times: “I’ve never seen anything like it, every link in the supply chain is stretched. Ships, trucks, warehouses.”
Shipping container company Textainer Group Holdings (NYSE: TGH) recently released its fourth quarter 2020 results, saying the demand for containers continues to grow. CEO Olivier Ghesquiere noted the “strong rebound in freight volumes that started last July”. He added: “As we head into the new year, we continue to see strong demand for freight and containers.”
It is a capital intensive industry as ships and containers need to be constantly maintained and fleets updated. But a current peak in the cycle will likely take months, if not longer, to subside, which will keep shareholders of those stocks happy until the next downturn.
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